To avoid prise rise, people should think of using public transport. Practically its impossible in India. Tax incentives and recognition should be given to auto industries as well as for oil cos for R&D. I think the awareness for efficient use of fuel should be started right from the school.

Ajay - your data and rationale is compelling. Could you speculate the short term effects/shocks of moving to a floating oil price would have if say done today? Right now seems to be a good time to do this - commodity prices are not that bad, Govt. is stable enough and not looking to the next election. However, rising inflation is a concern. I wonder what the short term effects of something like this would be (I understand that to some extent the degree of subsidy in place at the moment would have an effect and if that is large, a gradual convergence would be adopted instead of a sudden floating).

What is really scary is what is happening with Iran right now. What if the US or other countries decide to try to blockade Iran's exporting of oil - that could be catastrophic for prices. I am sure China will gobble up that oil though.

Frankly,I don't buy the fact that government is subsidising petrol. In US it is completely decontrolled and Indian retail prices are considerably higher than US. SO the options are:1) Government taxes petrol more than it subsidises, resulting in the higher prices. It presents the subsidy as a petrol subsidy without presenting the tax asa petrol tax, thereby misleading people.

2) The oil companies BPCL, HPCL etc. are overstaffed and inefficient, inflating costs. Thus what the government is paying is not petrol subsidy but labour subsidy.

So the root cause should be addressed instead of simply calling it petrol subsidy because the Indian consumer is definitely NOT being subsidised at the petrol pump.

Please note: Comments are moderated; I will delete comments that misbehave. The rules are as follows. Only civilised conversation is permitted on this blog. Criticising me is perfectly okay; uncivilised language is not. I delete any comment which is spam, has personal attacks against anyone, or uses foul language.